October 20, 2011

Flat tax and pulling your own weight

by Doctor Science

Herman Cain has lured all the flat-tax advocates out into the open again, and I'm trying to find a more effective way to reply to them than banging my head against the wall and chanting "regressive! regressive!"

In fact, why should taxes be based on income at all, if the services offered by government are not received based on income.
...
Largely, our taxes should be paid relatively equal amongst everyone, if we're so sure government should be doing what it's doing now.

Paul, if economics is not a morality play, explain to me why the objectives of your economic solutions are always to help the parasites of society while pretending that we're somehow MISTREATING them if we choose not to hold a gun to the rest of society's head to collect taxes.

The top 1% could pay far less % in taxes for all I care, as long as they're not withdrawing services directly from government, and not infringing on my freedoms.

Here's the metaphor I'm working on to try to explain how wrong this is.

Imagine a group of five people. They're in a room on the third floor of a building with no elevator, and they have 1000 pounds of assorted stuff to bring downstairs and stack outside the building. What's the fair way to do this?

The simplest solution, but only works in highly-specialized cases. Part of Defenestration, an ongoing installation by Brian Goggin at the corner of 6th and Howard St. in San Francisco. Photo by KayVee.Inc.

1. Everyone could bring down their own stuff. If the stuff is such that it's really easy to tell what belongs to whom, then maybe that would be the fair thing to do. This doesn't correspond to taxation at all, but to purchasing. No-one's life is easier, there are no burdens shared or economies of scale, but it's easy and fair.

2. Now suppose the group is a band: 2 guitarists, bassist, drummer with a full kit, and the guy who plays the harmonica.

Ron Woods' painting of the Stones performing in 1975, by which point they definitely didn't have to carry their own equipment.

Clearly the equipment burden is distributed very unevenly, and they'll never get to the gig on time if everyone is only responsible for their own instrument. So they decide that each person takes down about 200lbs of stuff, to distribute the work more evenly than the burden. This is the flat tax: one-fifth of the population (by wealth) takes down one-fifth of the stuff, the taxes. It looks fair: the burden is equally shared, everyone pulls their own weight.

3. But now, suppose the five people are a family:

grandma, age 75

dad, age 45

mom, age 45

son, age 20

daughter, age 10

and they're taking the stuff downstairs to load into the van and go on a trip together.

[I couldn't find a good picture to illustrate this scenario -- suggestions wanted!]

The 20-year-old son is probably *much* stronger than anyone else. Grandma may have trouble getting down with much more than herself, and while the 10-y.o. is pretty bouncy, she can't really take all that much in any one trip. The parents fall in between.

Is it fair if the son ends up bringing down 600lbs of the stuff, while Grandma brings only 30lbs and the others divide up the rest? Yet I assume we'd all agree that this would be the *reasonable* thing to do, even though it means everyone doesn't "pull their own weight".

In this metaphor, the strong healthy young son represents the wealthy, the people with the most money=strength. This is *progressive taxation*: we're all on this trip together, so we help each other out.

The fact is, speaking as someone who's been poor and who's been well-off, when you're poor each dollar and each percent of income going to taxes *hurts more*. For both poor and wealthy to pay 20%, say, in taxes is *not the same thing*, because it's not the proportion of your income that makes the difference, it's how much it changes the kind of life you can live. When I was making only $10K/year (30 years ago), $1,000 was a monstrous expense, more than I could bear to think about. When we had an income of $80K, $8K was a *lot*, but not more than we could afford for something like a new roof. It had to be budgeted, but it wasn't a catastrophe. I'm not sure what we're going to take in this year, but 10% would make me sweat -- yet not *panic*, as it did when I was truly poor.

Maybe that should be the metric: If you merely *resent* your taxes, you're not paying too much. It's only when they make you at least break a sweat that you might deserve some relief.

A flat tax is like crushing Grandma and little sister under a burden you could bear, because "it's fair!" and "everyone should carry their own weight".

Comments

The top 1% could pay far less % in taxes for all I care, as long as they're not withdrawing services directly from government, and not infringing on my freedoms.

Every time I read something like this paen to the libertarian ideal, I always wonder what alternate reality the author lives in. For one, the wealthy never get no services from the government (as the author tries to imply). For openers, the government provides a lot of services that writers like this blissfully ignore. Protection, both physical (police and military) and legal, leaps to mind, but those are hardly the only ones.

In fact, I don't understand how they resist the lure of one place on earth which already is run on their libertarian, no government, ideal. That would be Somalia -- but perhaps they just haven't heard of it.

Once someone gets a grip on reality, it idea that a "flat tax" is obviously not fair on any reasonable definition. But by the same token, someone who is a flat tas enthusiast is pretty clearly not tightly connected to reality. And there is generally no point in trying to persuade someone who isn't.

The weak must die. It is the Law. If you don't know that it is the Law, you are probably weak and therefore should be dead, so kindly type your GPS coordinates into the computer to facilitate rapid delivery of a Hellfire.

I prefer the Shopping Mall Rental analogy.
You are a Cinnabon in a mall. You are opposite a Target. Who pays more rent, you or the store that has ten times as many customers spending ten times as much, and using the bathrooms, correidors, parking lots, etc, as well?
You pay a percentage of sales.
Which means Warren Buffet should pay as much of his income as his secretary, not less.

We don't have a failure to understand here. We have a conflict of fundamental premises. All the analogies in the world aren't going to make that go away, or shift anybody's opinion.

You think fairness is defined by, "From each according to their ability, to each according to their need." The fact that somebody has a lot of money is, by itself, reason enough to tax them heavily, and how much the services they get actually costs doesn't show up in the equation at all.

While the fact that somebody wants/needs something is reason enough to spend whatever it takes to provide it, and never mind whether they'll pay for it, or even whether they'd think it was worth it if they did have to pay for it.

We think fairness is, "You pay for what you get, and get what you pay for." Sure, it's a shopkeeper's morality. Whatever, like that's an actual bad thing.

If Bill Gates and Joe Blow both walk into McDonalds, they both pay 99 cents for a hamburger. Gates doesn't pay $990 dollars, just because he has more money. That's fairness in operation.

And if a homeless person comes in, and somebody foots the bill for their food, that's not fair, that's charity. Which is a distinct category from fairness, a departure from fairness, which people are entitled to engage in with their own money, not other people's.

"Every time I read something like this paen to the libertarian ideal, I always wonder what alternate reality the author lives in. For one, the wealthy never get no services from the government (as the author tries to imply). For openers, the government provides a lot of services that writers like this blissfully ignore. Protection, both physical (police and military) and legal, leaps to mind, but those are hardly the only ones."

And every time I read this, I know I'm going to soon be reading a rant about how what the wealthy get from society is that we don't immediately rob them, rape their daughters, burn their homes to the ground, and drive their weeping children into the desert. And, really, isn't that service worth everything they've got, and more?

Because, really, the alternative to the shopkeeper's morality is the protection racket's morality. And it always drops the mask sooner or later in these discussions.

Not chiming in with Brett, but regressive does not mean not progressive.

Nomenclature aside, there are likely fair points to be made about Cain's notions about tax code implementation. But the President proposes; he does not dispose. If he can't convince Congress, then it goes nowhere.

Same as now, really.

I'm actually kind of surprised that people are attempting to evaluate Cain's "plan", rather than note that it's not really enough of a plan to evaluate.

In theory, the plus of a flat tax is that it gives everyone an equal incentive to ensure that gov't uses their money wisely.

I like Doc S' metaphor, because it allows for the following questions:

1. Who put the baggage on the third floor in the first place?

2. The 20 year old has to take down more than his fair share everyday, or every year, regardless of how much he is responsible for putting there in the first place.

While I concur that a progressive system is more fair, for the reasons stated below, the equities do not lie solely in that corner. The well off do consume much less in gov't services and those who consume the most pay the least. They are incentivized to demand more services because there is no cost to them associated with any increase. This lets politicians pander to those consumers, just as politicians pander to taxpayers, both sides arguing disingenuously that they only seek a fair middle ground. They seek election and advantage.

A somewhat, ultimately capped progressive system is more fair than a flat system, given disparities in earning levels and asset accumulation. Period. If the well off consume less gov't services, they benefit more from the stability produced by a society where some bare minimum standard of living exists. In my world, that standard would be so low that there is clear incentive to work, save and live within one's means, but that's just me.

More importantly, the debt we now have makes discussion of a flat tax pointless. If we aren't going to tax ourselves into prosperity, neither are we going to get their by cuts alone. The debt has to be addressed, near and long term and not allowed to repeat itself absent an existential threat. Only those with the means to do so can pay down the debt.

If I were directing traffic here, we wouldn't discuss flat taxes because it is the political equivalent of debating the number of angels who can dance on the head of a pin. It is doctrinaire conservative eye candy, nothing more. Not going to happen, not worth fussing about.

Take ten percent of a poor person's income and you likely deprive them of a meal, or heat, or some other essential good or service.

Sure. And if you (for instance) levy excise tax on things that no one can currently do without, such as gasoline or other motor fuel, you similarly deprive them of more important things than a wealthier person would be deprived of.

Ditto Social Security, which seems to morph from tax to retirement benefit and back, depending on what point debaters wish to make.

Ditto property tax, which affects both renters and owners, even if you own outright.

I could probably go on at length, but I'm starting to bore myself. This seems like exactly the same kind of dead-horse-beating conversation that we (ObWi collective commentariat, not you and I in particular, russell) get into every time the question of equity of taxation comes up. Taxes aren't going to get flat, and they're not going to get fair. Depending on your definition of "fair", of course.

Brett: The fact that somebody has a lot of money is, by itself, reason enough to tax them heavily, and how much the services they get actually costs doesn't show up in the equation at all.

While the fact that somebody wants/needs something is reason enough to spend whatever it takes to provide it, and never mind whether they'll pay for it, or even whether they'd think it was worth it if they did have to pay for it.

This is a strawman, and a flimsy one at that. I'm not even going to bother getting into details.

McKinney: The well off do consume much less in gov't services and those who consume the most pay the least.

To both, what "doesn't show up in the equation at all" is how much the well off benefit from government services, whether the costs of those services can be directly attributed to the well off or not.

Brett: We think fairness is, "You pay for what you get, and get what you pay for." Sure, it's a shopkeeper's morality. Whatever, like that's an actual bad thing.

McTx: The well off do consume much less in gov't services and those who consume the most pay the least.

The notion that the "government" (federal/state/local) is some sort of service provider, or can be reduced to such, is, quite frankly, ridiculous. As if the sum total of government contributions to society is the marginal cost of, well, what? I guess, if you use the court system then the time/salary of the judge/clerk/bailiff. If you use the roads, then I guess the wear and tear inflicted by your car. Flying on a plane? Then whatever it costs to employ the FAA/TSA folks and the runway landing impact (among other things, surely).

Missing from this libertarian/right wing/reactionary/conservative view of gov't as a "fee for service" organization (just like McDonalds!) is any consideration of the asset base from which the services flow. It's as if the courthouses, roads, air traffic towers, etc. appeared fully formed from the head of Zeus, and that so long as the taxes I've paid to cover the marginal cost, asking anything else is an affront.

I've mentioned the below here before I believe, but I'll do it again in my futile attempt to get Brett to understand. About 2 years ago the street in front of my house was totally dug up and regraded. Not one of those scrape and drop asphalt jobs, but a full on dig down 3-4 feet to redo the drainage sort of thing. It took about a year. The cost, according to the sign, was around $3 million, for a half mile of road.

I drive on this street pretty much every day. Neither I nor my wife, together, have ever paid anywhere near $3 million in taxes in our lifetimes, and certainly not during the 7 years we've lived in our house. Even if you were cynical enough to argue that the price of regrading the street was inflated 10 fold due to gov't inefficiencies, and should have been only $300k, that's an enormous amount of money in its own right, much less to be extracted via tax (and yes, my wife and I have likely paid that much in taxes over the past 7 years).

But that's for just a freaking half mile of road! I have a short (distance wise) 6 mile commute. That's $1.8 million at the "government is 90% inefficient" rate. Never paid that much in tax. So I guess I'm a leach/parasite.

The "fee for gov't services" frame just don't hunt. You're using the asset base, which you haven't even remotely paid for, even if you're Bill Gates.

If Bill Gates and Joe Blow both walk into McDonalds, they both pay 99 cents for a hamburger. Gates doesn't pay $990 dollars, just because he has more money.

If McDonald's had any brains, they'd charge based on how badly each wants the hamburger, and how many hamburgers they can reasonably deliver in a particular time period. That's what baseball teams, concert venues and soda machines are starting to do.

The well off do consume much less in gov't services and those who consume the most pay the least.

This is an assertion that requires a great deal of proof. How much use do poor people have for, e.g., the SEC?

The disagreement is fundamental. The Libertarians and flat-taxers assume that it's all about individuals; your analogies are about groups.

The difference is that Libertarians simply don't comprehend human group interaction, while other types of "conservatives" divide people into "us" and "them" and try to ensure that "they" get as little of the pie as possible.

I mean, I've seen you make that same statement in various forms over and over, McK, and it requires more than just your say-so to make it, well, so. The well-off own more property, for one thing, so "consume" more in the form of police protection, the existence of the county (or other jurisdictional) recorder's office, the courts, whatever utilities are provided by government entities, and so on.

Unless you have some evidence to back this idea up, I'm going to call BS on it every time. Food stamps and unemployment aren't the only services out there.

The well-off own more cars so "consume" more services from the DMV and put more wear and tear on the roads, produce more waste so use waste disposal services more and have more environmental impact, etc., etc. This "the well-off don't use as much government" is just infantile silliness.

The well-off own more property, for one thing, so "consume" more in the form of police protection, the existence of the county (or other jurisdictional) recorder's office, the courts, whatever utilities are provided by government entities, and so on.

And, owning more and more valuable property, generally pay more property tax. Grant Hill the professional basketball player paid $145k a year in property taxes; Gary Hill the mobile home dweller paid $1100.

None of which is intended to negate the by-the-drink point made by Ugh.

I'm not sure how you would tot up the value of police protection consumed, honestly.

@McTex The well off do consume much less in gov't services and those who consume the most pay the least. (Not to pick on him particularly. He's just made the most succinct statement of the point.)

That's true if (and only if) you limit the discussion to those things (goods and services both) which are directly provided to individuals as individuals. But the rich probably consume more if you consider those things which are supplied collectively.

For example, who gets more benefit from the police, the rich or the poor? Well, absent police constraints any sensible thief will steal from the rich rather than the poor, simply because there is more there to steal.

Similarly, who gets more benefit from the military (and I'm not talking from military spending; a whole different discussion)? Absent the millitary, is a rich country more likely to get invaded or a poor country? With no military, would you invade the US or would you invade Zimbabwe?

And we could go on, as in the examples that Ugh provides and more. But we'll keep seeing the same thing. Which things are provided changes with income/wealth. But the cost of provision is hardly monotonic decreasing.

So overall, I'm not really buying the thesis that the poor clearly "get more" from the government. At the very least, the answer is a lot less clear cut than folks like Brett imply.

The whole topic of police protection is I think beside the point, because police are funded (at least where I live) from property taxes, which means that wealthier do in fact pay more for police protection than less wealthy people do. Ditto schools and other things funded from property tax revenues.

We can attempt to calculate the incalculable, or we can figure out what works while causing the as little suffering as we can manage. Like russell said, someone's ox has to be gored one way or another. The best we can do is make the pain minimal, when looking only at the cost to the individual irrespective of the benefits.

On fairness, and I've written this before - we tax income based on, well, income, not on who makes it. We're all subject to the same rules. Yes, we have to consider if we are making the incentives so perverse that our economy can't function properly.

That doesn't mean that if some number of people decide it's not worth their while to earn more because of whatever marginal tax rate they'll pay, that we've screwed things up. That's fine, so long as someone else is willing to pick up the slack, if that's even necessary. (Benie Madoff could have opted out without anyone taking his place, FREX.)

"2. Now suppose the group is a band: 2 guitarists, bassist, drummer with a full kit, and the guy who plays the harmonica."

Well, depending on the relative success of the band, the harmonica player and a roadie would be sleeping with the instruments in a truck in the parking lot.

Now, if it were The Who, when Keith Moon found out there a was a harmonica player in the band he would throw the player, his harmonica, the TV set, and as many of the toilet fixtures he could dislodge out of the bathroom through the third-floor plate glass window onto the street below and then maybe pee on the heads of the parasites below charged with cleaning up the mess.

I like Keith Moon.

"If Bill Gates and Joe Blow both walk into McDonalds, they both pay 99 cents for a hamburger. Gates doesn't pay $990 dollars, just because he has more money."

So, if the IRS charged everyone the same for government services, they could name the tax the "Happy Tax"?

I don't know, I don't think in America you can get anyone to say those two words in the same sentence regardless of the tax regime.

Actually, each individual should be weighed when they come into McDonald's and charged according to their future liability on Medicare, Medicaid, etc.

The fairest tax I can think of is a tax surcharge on each individual incidence of complaining about taxes. Not to mention, an extra tax on the guy at the end of the bar who segues from "We oughta go in there to Uzbekibekikissistanislauski and kick some bekia*ssy" to, in the next breath, "taxes are theft and when's it going to stop?"

Somehow, I don't think Reagan's principle of "if you want less of something, tax it" would work in the important American pastime of whinging about taxes.

And, owning more and more valuable property, generally pay more property tax. Grant Hill the professional basketball player paid $145k a year in property taxes; Gary Hill the mobile home dweller paid $1100.

Well, yes. But property taxes are flat: $x per $x,xxx of assessed value. The rate doesn't go up as the size of your home goes up.

The whole topic of police protection is I think beside the point, because police are funded (at least where I live) from property taxes, which means that wealthier do in fact pay more for police protection than less wealthy people do.

Where I live, there's a municipal income tax, and it's charged on gross (pre-tax, pre-FICA, pre-Medicare) income. There's been a municipal income tax every place I've ever lived as an adult, in fact. They fund your police out of property taxes? That's . . . yikes.

"Where I live, there's a municipal income tax, and it's charged on gross (pre-tax, pre-FICA, pre-Medicare) income. There's been a municipal income tax every place I've ever lived as an adult, in fact. They fund your police out of property taxes?"

Wow, in all my life I have never lived anywhere that had a municipal income tax. Al local taxes have aalways been property taxes.(or a local sales in one place)

I wonder what the comparative prevalence of those two methods is? I don't really have time to look it up now so I am just wondering out loud in case russell wanted to do the work. :)

@HSH Yes, we have to consider if we are making the incentives so perverse that our economy can't function properly.

Absolutely true. But what is the tax rate that breaches that threshold? If memory servers (just from reading; as a child at the time, I don't remember personally) the top tax rate in the 1950s was roughly triple the current top rate. And yet, the economy seemed to function quite nicely, thank you.

It may function better with a lower top rate. And I'm certainly not arguing for a return to those 90% top rates. But apparently progressive income tax rates can get pretty extreme at the highest levels without sending the economy into a tail spin.

"Well, yes. But property taxes are flat: $x per $x,xxx of assessed value. The rate doesn't go up as the size of your home goes up."

So what? The amount goes up. I mean, what are you arguing, that a 2000 square foot house costs 4 times as much to keep burglars out of as a 1000 square foot house? I doubt it even costs twice as much in services. But, in any case, fairness suggests you should charge for the services themselves, not based on some faulty proxy for them.

I mean, what are you arguing, that a 2000 square foot house costs 4 times as much to keep burglars out of as a 1000 square foot house?

I wasn't the one who drew a connection between size of home and cost of law enforcement in the first place, so it's not my argument to make. I said that it's a non-starter that the well-off consume fewer services, given X, Y and Z. Try to keep up with the grownups or just sit quietly, please.

There are some who are against 'progressive' tax schemes and yet are not 'pure' libertarians. I am certain several here have noted in the past how it is difficult to fathom how 'not wealthy' conservatives can eternally vote for conservative Republicans when, to all appearances, its not in their economic interest. The fact is that some of us do not value wealth (or endless government services) above all other things. Notions of loss of individual liberty is what drives this, since 'greed' can hardly be a factor for those who have little.

I would trade an appealing reduction in the power and influence of the Federal government for some 'progressive' scheme of taxation. But my impression is that those who want to get the well off to pay more are not interested in such a limitation.

Anyway, there may indeed be a greater range to the values scheme than noted above.

Brett Because, really, the alternative to the shopkeeper's morality is the protection racket's morality. And it always drops the mask sooner or later in these discussions.

Actually, it isn't. The police, for example, are not supposed to attack you physically for refusing to pay for "protection" -- which is what a protection racket does. At least, I've never heard of a protection racket which claimed to protect you from attacks by third parties, just from attacks from them if you didn't pay them. But maybe you have wider experience in these matters than I.

On Flat Tax proposals generally, they are almost uniformly not flat (though Mr. Cain's proposal may actually be so, I haven't seen it spelled out anywhere). Usually, there is some exemption of the first $X in income, after which income (however defined, another nit) is taxed at Y%. I usually take this as an implicit admission that progressive taxation is the right way to go - even among those who most push a "flat" tax. After that kind of acknowledgement, it seems we're merely haggling over the price, so to speak.

Brett: So what? The amount goes up. I mean, what are you arguing, that a 2000 square foot house costs 4 times as much to keep burglars out of as a 1000 square foot house? I doubt it even costs twice as much in services. But, in any case, fairness suggests you should charge for the services themselves, not based on some faulty proxy for them.

See, this is the problem. What is the 2000 sq ft. homeowner actually paying for in this circumstance? The specific cost of protection - literally, having the police stand outside the property to ward off burglars? Is it the deterrence value? And how are the police supposed to make it to that house in the first place if we're on the "fee for service" plan? Suppose that is the only house in the precinct worth burglarizing, then what?

I mean, you've already admitted the need for some sort of publicly funded police force (though tell me if you feel differently), so all we're talking about is the mechanism to pay for it.

if police departments were run on "fee for service" plans, they would become profit-driven. so, prices for services would rise until only the rich could afford them. that would lead to the rise of police insurance agencies who will sell you policies that would cover common policing needs. this would allow the police industry to charge even more for services.

eventually we'd reach a point where police insurance itself would be too expensive for most people, and ever-increasing percentages would go without this insurance altogether. then, uninsured and unable to afford even basic police services, the uninsured would become vulnerable to people who know who can summon police and who can't. this would lead to large chunks of communities lawless and governed by violence. the violence would, of course, spread as the criminals became bolder, richer and better-equipped. the police would have to charge more to keep up with the challenge.

when the overall community finally got sick of this, and demanded universal police coverage, "conservatives" would insist that the answer is more guns.

Why the morality? The rich have used the power of the state to become rich. The laws and public policies we now have in place act to transfer wealth upward. If that's not a reason to support progressive taxation, well, then there simply aren't any. So cast futile disagreements about fairness aside.

Further-power corrupts. You've heard about that, right? Don't believe that happens here? Don't be absurd. Taxing the wealthy within an inch of their lives is manifestly the best way to maintain the social contract and anything like an effective democracy. So, in that sense, punitive taxation on the wealthy is actually good for them, and the externalities are all positive.

You brought up the concept of 'using government services,' in your example.

One thing not commonly referred to is how the rich do disproportionately use our common resources. They avail themselvse, throught their businesses primarily, to the courts. They tend to use more fire protection. They tend to use more police protection.

But beyond that, they are INDIRECT beneficiaries. An educated, well-kept middle class is a great market from which the rich can profit. Whereas the slums in which they'd put us through their selfishness... Not so much.

Let's look at Walmart. Without the Interstate Hightway System, they don't exist. They can't. They'd be at the hands of the railroads and when rail had a quasi monopoloy on delivering goods... Well, let's just just Walmart's carefully timed distribution network wouldn't survive it...

Or education. An educated populace has the capacity to provide both better employees and, through better wages earned by skilled, educated labor, better customers.

And so it goes. Year after year the wealthy ignore the truth of how our 'socialized' programs have made their wealth possible and grasp their John Galt mentality.

Not sure how this would play out in the real world, but a flat tax on 'disposable pay' would be slightly fairer than a flat tax on total pay.

A poor person may spend nearly all their money on basic living essentials such as housing and food, being left with little to no leftover pay for extras.
A tax on disposable pay would be far less crippling than a flat tax on total pay for this example person.

A rich person has an absurdly greater amount of their income as 'disposable income' due to their basic living costs being so much lower as a % of income compared to the poor.

Though the pay disparity is still so great you'd probably need some sort of logarithmic tax escalator linked to high pay to keep the tax paid burden on the rich close to that paid by the poor, even with this system.

Anyone disagreeing with cleek, please answer this question: how does your ideal society differ with the current situation in Somalia? Seriously, there's a place where only the (relatively) rich can afford to hire portection. Everybody else is at the mercy of whoever has the most guns. And guns are very, very widely available.

So Brett, et al., how is the situation different from what you appear (at least to my limited understanding) to be advocating? Because the only difference I can see is the (unfounded, IMHO) belief that "people here wouldn't act like that." What makes anyone think that?

To answer, my ideal society would have zero governments, not 23 or so, which I understand to be the case in Somalia. Really, though, I shouldn't have answered that silly jab; It's no more appropriate a question than asking a 'liberal' how their ideal government differs from North Korea, except that your average conservative isn't shamelessly stupid enough to ask such a thing.

Ok, seriously, and in the present context: As I say, I believe "fairness" consists, in this context, (Taxation) of getting what you pay for, and paying for what you get. Now, the distribution of wealth is such that some people simply can't pay for what we're giving them. That they don't have to pay for it is not a manifestation of "fairness", it's a manifestation of "charity".

Or would be, anyway, if the difference were being made up by other people voluntarily pitching in. Which it isn't, and compulsory charity is an oxymoron. But I suppose it's something kind of vaguely related to charity.

Probably the best we can hope for, since a fair taxation system is impossible, is to come as close as possible to charging people for the costs they actually incur, with a small addition for those who can afford it, to make up the shortfall from people who genuinely can't afford their fair share.

A system like this would be even more 'regressive' than a flat tax, since the only thing flat about a flat tax is the rate, and since the cost of government services does NOT rise in proportion to wealth, (Unless you define it so as to make it a tautology, as several have done above.) a flat rate will overcharge the wealth. Importantly, it would subject the average person to enough of the expense of government, that the majority would have motive to care about the government being frugal. They'd have 'skin in the game', as some put it.

Of course, the point of progressive taxation is the exact opposite: To minimize the number of people who "have skin in the game", so that the majority of voters will have no reason to care about the cost of government programs, and will vote for programs they'd never think reasonable if they had to pay for them.

my ideal society would have zero governments, not 23 or so, which I understand to be the case in Somalia.

I wasn't intending to ask a silly question. From what I know of Somalia, there is no single central government. There are, as you say, numerous would-be governments.

But absent a single central government, that is hardly surprising -- people form organizations (call them governments or not). After all, even if you don't want a government intruding on you, others are likely to see some merit in one. Which leaves you, as with people in Somalia, either fighting solo against them (physically fighting), or forming your own organization. At which point, you have just instituted something that looks amazingly like a government.

And, in order to maintain that organization, someone has to pay for it. (Pay in their own time, or pay money to someone else to put in the time.) Maybe everybody chips in; more likely some are happy being free-riders. At which point, you are stuck with either letting the free-ride option sit there looking attractive to everyone, or mandating and enforcing contributions -- i.e. you now have taxes.

You can have an ideal of zero governments. As long as you realize that it is an ideal which can never be realized in the real world. The desires of the rest of humanity simply won't allow it (unless maybe you can find an island in the remote reaches of the Pacific -- one which has nothing anybody else wants).

In much the same way as every other product has risen in price until only the rich can afford it, I presume?

the police would be an armed monopoly, with the sole power to legally apprehend criminals in your city. and they will present you with a bill which you cannot negotiate, should you need their services. if you fail to pay, they will fail to protect and serve you. this will be public knowledge.

what keeps their prices down? what prevents them from offering top-rate services to people who can pay more, and cut-rate services to everyone else?

Under the "family trip" model, Buffett should pay a much higher percentage of his income in tax than his secretary, because 20% of her income is a real burden that affects her daily life, while 40% of his income still leaves him with more than anyone could possibly need.

Why does the "shopping mall" model work for you better than the "family trip" model?

Why does the "McDonalds burger" model for society work for you when my "family trip" model apparently doesn't? Do you think that when Strong Son takes Grandma's stuff downstairs for her that's unfair in some way? I have been to clinics where payment is on a "sliding scale"; is that unfair?

Analogies are useful in clearing up misunderstandings. The Left/Right divide is not a "misunderstanding".

I understand the arguments from the Right perfectly well. My disagreement with them is not due to the Right's failure to come up with a homely enough analogy. I think Brett would say the same about arguments from the Left. The Left/Right divide boils down to different notions of "fairness", which no analogy will ever reconcile.

I don't know where out individual notions of fairness come from; they are congenital, I've begun to think. Even if I'm wrong about that, they are certainly near the core of our "self". Brett Bellmore would be a different person if he changed his notion of fairness; and so would I.

However we got to be the persons we are, we can only live as one nation if we all agree about something. One thing we have usually all agreed on is that the very essence of democracy is this: THE MINORITY DOES NOT GET ITS WAY -- even on questions of what's "fair". Or maybe especially on questions of what's fair.

After all the debates and all the arguments, whether direct or by analogy, we ultimately decide on policies by VOTING. The point of voting is to count heads (in preference to bashing them) and do what the majority wants. The minority, Left or Right, is practically guaranteed to think the majority preference is "unfair".

Analogies may help to persuade people who have not yet made up their minds, but I'm not sure anybody who reads ObWi falls into that category.

Doctor Science: The reason your family trip analogy doesn't work, is that Obama ain't my father, and I'm not a little kid. IOW, families are absolutely atrocious analogies to government. Citizens not being little kids, not particular reason to think the 'parents' feel any love towards them, families not being scalable, and so on.

"One thing we have usually all agreed on is that the very essence of democracy is this: THE MINORITY DOES NOT GET ITS WAY -- even on questions of what's "fair"."

The essence of democracy is that the majority gets it's way on things which are decided democratically. Which should, ideally, be as little as possible; While it is better, on the whole, that the majority oppress the minority, rather than the other way around, it is better still that people not be oppressed.

And in the end, democracy, like any other system of government, is just a way of organizing oppression, and a free people will want as little of it as possible.

It's no more appropriate a question than asking a 'liberal' how their ideal government differs from North Korea, except that your average conservative isn't shamelessly stupid enough to ask such a thing.

The "average conservative" has spent nearly every day of the last three years calling corporate lackey Barack Obama a communist. Try harder if you're going to troll.

If the rich get more out of the government, should they get more votes?

Seb offered this in jest (right?), but the funny thing is, that this has not been an uncommon sentiment throughout the history of the nation.

This is perhaps OT, sorry if so.

Those who own the country ought to govern it.

Attributed to founder John Jay.

The idea that there is a natural aristocracy, which by right ought to rule, and that the accumulation of property is a reasonable outward sign of someone being a member of thereof, is a pretty old and ingrained doctrine.

The essence of democracy is that the majority gets it's way on things which are decided democratically. Which should, ideally, be as little as possible

Maybe it's just me, but I find this to be a remarkable assertion.

I appreciate that, all things considered, it's great to be left the hell alone to do whatever the heck it is you want to do.

In fact I more than appreciate it, it resonates to the marrow of my bones.

The problem is that over 300 million people live here, mostly in fairly close proximity to each other.

"Live Free Or Die" is a great motto for, frex, New Hampshire, because NOBODY LIVES THERE. The whole state has about the population of metro Milwaukee, and most of them are in Nashua and Manchester.

IMVHO libertarianism is a great philosophy, but I do not see how it scales to reality.

There are too many of us. We have to deal with each other. That means we need an organized and hopefully peaceful way to sort out our various conflicting interests.

If you can think of a better means than democracy, in either its direct or representational forms, by all means let us in on it.

Brett asserts that ... in the end, democracy, like any other system of government, is just a way of organizing oppression, and a free people will want as little of it as possible.

A truly free people might have its own notion about what "as little of it as possible" means, and it might not be the same as Brett's. How do we reconcile that little difference of opinion? Short of elevating Brett to the Throne of Freedomstan, I mean.

But people shouldn't bother to evaluate what the guy who is either the #2 or #1 Republican candidate for President at this time is saying and proposing?

My point is that it's not specific enough to perform any sort of evaluation that you could hang your hat on. Which might be deliberate, certainly.

Cain's implied or stated outright that the 9-9-9 proposal is a stepping-stone to the flat tax, which I believe does carry some low-income exclusions. I don't expect that Cain would propose something preposterously worse for low-income people than the flat tax as an intermediate step to the flat tax, so from my POV it's logical to assume that we just don't know all of the details.

I'm far from well-versed with either scheme, but the flat tax has been rather better described than the 9-9-9 scheme.

Wealthy people generally keep the vast majority of their wealth in property other than real estate.

That's a good point; I was focusing rather narrowly on real property.

I'd guess that wealthy people have MOST of their wealth in real estate and/or investments. WRT investments, that wealth has been taxed via regular income tax as earnings, or will be taxed as income on withdrawal. One partial escape is inheritance tax, which I am ok with changing.

If all of those tax structures fail to capture the cost of protecting those assets, then the tax structures have not been designed properly.

Yeah, I'd say noting that the plan is so lacking that it can't be evaluated (probably meaning "analyzed") is, itself, an evaluation, if on a different level than looking at the details, which happen not to be there (at least according to Slart's argument - I don't know, but saying there actually are details worthy of analysis would be a different criticism of Slart's position).

Brett: As I say, I believe "fairness" consists, in this context, (Taxation) of getting what you pay for, and paying for what you get. Now, the distribution of wealth is such that some people simply can't pay for what we're giving them. That they don't have to pay for it is not a manifestation of "fairness", it's a manifestation of "charity".

Let me try this again. You, personally, Brett, will NEVER, "pay for what you get" in terms of the government infrastructure and services you use in the course of a week (or even in the course of a single day, I'd be willing to wager). How does it feel to accept this charity while you rail against it?

Dr Science is sharing a really profound insight and it's largely being overlooked in the comments. What she had addressed is something economists call "utility" (if intentional methaphor - nice job, if independently thought up; very impressive - hats off either way).

Utility is value or, more simply, hapiness. How much utility a person gains from some economic unit is how much hapiness they get from it. An economic unit can be a car, vacation time - or, most commonly, money.

As Dr Sci. notes, a poor person gains a lot more utility from the next dollar in his bank account than the wealthy person does because that extra dollar represents so much more needed (as opposed to conspicuous) consumption. Or, to illustrate, the poor person really needs that extra dollar to eat or keep a roof over his head whereas the wealthy person already has so much that the purchase of some luxury item, like the newest greatest Rolex, doesn't bring him a great deal of marginal hapiness.

The more you have, the less marginal utility is gained on the marginal dollar.

One way to perceive a fair and equitable tax structure is to base it on marginal utility and, doing so, a progressive arrangement results.

Flat tax advocates are Social Darwinists. I’m talking true flat taxers, not the folks who say they want a flat tax and then mitigate it with an exemption so that those below a certain line don’t pay at all. That “flat tax” is, as someone up thread pointed out, a progressive income tax that isn’t very progressive.

Look at all this rationalizing about the unfairness of those who have more paying more. Supposedly it’s taking away their freedom, it’s a protection racket, or charity which is assumed to be a bad thing.

Phooey. Taxes are membership dues. They are essential. In a diverse and complex society people who demand that their taxes pay only for those things they approve of or use themselves are being self indulgent. So what is a fair way to pay ones membership dues to this complex large scale organization?

Well if we all had exactly the same income earning capacity, if would make sense to tax everyone at the same rate. But we don’t. We do not all have the same earning capacity.

A flat tax takes out the same proportion of everyone’s paycheck but the effect on everyone is not the same. A person who already has huge amounts of disposable income would have even more income from a switch to a flat tax. A person who lives hand to mouth would suffer in a life threatening way. People who now have modest amounts of disposable income would have less. How can this be justified as fair?

This is where the Social Darwinism starts to come out. Those who expect to benefit from a flat tax always get to it sooner or later: I earned my money! Why don’t those other people just earn money like I did if they don’t want to suffer or be inconvenienced by a flat tax? It’s their fault! They had choices! Why didn’t they go to law school, become a doctor, become a bankster, start a pizza empire, inherit or marry wealth, get into the high end real estate market? Why should I have to carry those losers?

First of all the idea that a progressive income tax makes the higher end people carry the lower ends ones is bullshit, but that’s not my point here. My point is that the notion that “I shouldn’t have to pay for them” is based on a sense of superiority to “them”. It has to be based on that. It’s based on the assumption that “they” are lower in the income hierarchy due to their bad choices and they could have been higher in the hierarchy if they had just made better choices. But “they” lacked the ambition to be higher in the hierarchy or lacked the academic smarts or whatever. Lacked something that those higher in income had. It’s fundamentally disrespectful of human life and human beings to assume superiority based on income.

People can always choose not to make enough money to be subject to whatever marginal rate they think is unfair. We also allow anyone who wants to leave the country and renounce citizenship to do so, short of any detention for specific legal reasons not related to emigration restrictions.

Hell, some people might even object to a flat tax if the rate were too high for them. What to do?

I'd be curious to know how many flat taxers would object to paying a certain effective rate under a progressive tax scheme while being fine with paying the same rate under a flat tax, based simply on the fairness objection. At least under the progressive scheme, there would be a way to lower your effective rate by earning less. Not so under a flat tax - less choice for the individual there.

I'm being a bit cute here, only because arguing with people who object to the very concept of progressive taxation is an exercise in the absurd. It takes you to some pretty weird places.

If resource distribution rules are set that my time given to a corporation, away from my family and from what i would, as a would be free man, prefer to do is less compensated then to some manager, now you conservatives want even more of my compensation to be given back. And the distribution rules are set by force and controlling power not by democratic tendencies. Check out this http://www.people.hbs.edu/mnorton/norton%20ariely%20in%20press.pdf>study about what Americans perceive and what distribution want comparing to ideal and Sweden type distribution.
You so called conservatives want even more unequal unjust distribution then already is, even tough the other study says that US taxation is the most progressive of all developed world, but also the most unequal.

I mean, arguing with people about what the rates should be and where they should kick in results in a discussion of practicalities - how it'll affect various personal decisions and types of economic activity and such.

IF you look how the taxation is set up and what it pays for separate of the larger picture, or in other words if you look at every single tree, you would never find two branches equal as when you look at the forest and how stable and orderly it is. Wealth distribution affects order and stability and should be looked at as such. Taxation is part of wealth distribution.

'Despite* his current surge in popularity among GOP voters, he's proven himself to be a remarkably confused and stupid man in nearly every interview he's given.'

The links here address Cain's personal position on abortion and his lack of detailed knowledge on specific smaller nations. Neither of these is likely to register as significant for those who think we need to deal first with domestic threats and then with what takes place on foreign soil. Two areas that must be addressed domestically are tax reform and domestic energy resources policy as the current administration refuses to do so. It took three years for the administration to move on essentially non-controversial trade treaties so it is too much to expect action on 'hot' topics.

Laura, what you are saying is, the flat tax argument regarding my failure to become an NBA basketball player (and so be able to cash in big time on that) has to do with my failure to try hard enough, and nothing to do with the physical equipment that genetics has endowed me with. (Why would slow reflexes, poor coordination, and low, for a basketball player, height matter?)

And is mental ability (which is disproportionately rewarded in our current economy) any less inherited than physical ability? Which makes the "poor choices" argument look particularly silly, not to say utterly self-serving.

You, personally, Brett, will NEVER, "pay for what you get" in terms of the government infrastructure and services you use in the course of a week

what we all get out of government infrastructure and universal services is a constant, and high, standard of living.

if i never have to avail myself of direct police help, i can thank the police for keeping the crime rate low enough that it never affects me - and they do that by taking criminals off the street and delivering them to the justice system.

when they take a local burglar or murderer off the street, they have made the town safer for me and for everyone else in the town. that's a valuable service. everybody benefits from it. why should one household have to pay?

wj
What Laura is saying is that income inequality has political causes while your inability to become NBA player and cash it out big time has natural causes.
And mental ability is not disproportionately rewarded in our current economy but moral flexibility is.

Russell, I offered it in jest, because obviously they shouldn't, but I offer it seriously because 'obvious' cuts pretty hard against the analogy.

If grandma always wants her stuff moved around from the top floor to the bottom floor, does the 20 year old EVER get to say no? Can he insist that she move to the bottom floor to make things easier to move in and out if she is going to be cranky about it? Is he allowed to say that he doesn't want to go on the eighth trip with grandma because he is courting a girlfriend instead?

Even in families (where we assume MUCH MUCH greater responsibilities between members than we do with people who share nothing more than being in the same state as each other) there are pretty hard limits.

I'm ok with progressive taxation, but like all moral insights I think the "marginal utility" one gets out of control fast. I tend to think that the US should be more progressive than now AND that the middle class is crazy if it thinks that taxing the rich for most of the current wants (and apparently all the future ones) is completely unfair and probably impossible. The Democratic Party's "no new taxes for the middle class" isn't going to work well for the country.

"what we all get out of government infrastructure and universal services is a constant, and high, standard of living."

What we get out of living in the society we live in, of which government is only one factor, and scarcely only a positive factor.

We also get a constant, and high, standard of living from modern dentistry, and plumbers, but that doesn't imply that either dentists or plumbers are entitled to a steeply progressive share of everybody's income.

Income tax rates are historically very low. Income tax receipts as a percentage of GDP are historically quite low.

The nation is running a deficit and has a sizable and increasing debt load. The reasons for this are numerous, but include two very lengthy and expensive wars, huge increases in spending on 'homeland security', and very large direct payments to very large banks to avoid total financial collapse.

So I would say no, it is not time for the 20 year old to say "no".

And in fact, I agree with your thought about the middle class, and would say that dad, mom, and son should all put aside notions of saying "no" right now.

Maybe grandma gets a pass, maybe daughter.

I would welcome having my taxes returned to what they were in 1999, because we need the money.

I appreciate the philosophical debate about fairness and liberty and all of that, but the bottom line is that we have bills due.

Taxes pay for useful stuff. If that stuff doesn't get done, things start falling apart, in many cases literally. Then, it costs more to fix them, or they never get fixed, which also sucks.

Not that it's particularly relevant to the specifics of the discussion we've been having, but it seems to me that there are a number of flat-taxers out there who think the flat tax is a good idea because the tax code is too complicated and that, somehow, a flat tax would significantly reduce that complexity. They're very confused in that regard, but they're out there. In fact, I'm related to at least one of them.

critical tinkerer, you may feel that "And mental ability is not disproportionately rewarded in our current economy but moral flexibility is." But while moral flexibility is arguably rewarded, anyone who thinks that mental ability is not rewarded needs to take another look at the data. That's not to say that it is the only way to fame and fortune. But it certainly is one of the easiest ways. There are, after all, a lot more people doing quite well in IT than all of the NBA players in history. And, by the time they are 50, a lot more multi-millionaires, too.

Are there more bright people who are rich than morally flexible ones? I haven't seen any demonstration of that. And I suspect that it would be hard to answer the question without figuring out how to control for those who are both -- that is, you may want to include Buffett, but certainly not Gates, if you want to prove the point.

What would you say if I said that taxes are really a way to manage aggregate demand by draining purchasing power from the private sector so that public spending doesn't overheat the economy? And maybe to prevent over-concentrations of wealth to prevent de facto aristocracy, if necessary?

hairshirt: I'd be curious to know how many flat taxers would object to paying a certain effective rate under a progressive tax scheme while being fine with paying the same rate under a flat tax, based simply on the fairness objection.

Good question. By "the fairness objection", I assume you mean something like: "I don't object to paying X% of my income in taxes; I do object that people with smaller incomes than mine pay less than 20% in taxes."

I bet there exist people whose notion of fairness is like that. I bet one such person is whoever it was who answered "Yes" when I asked some months ago:

"Would you consider a dictatorship that collects 10% of GDP in taxes to be a 'smaller government' than a democracy that collects 20% of GDP in taxes?"

wj, the word "disproportionately" is probably carrying some amount of weight in CT's comment. Yes, mental ability is rewarded, but is it disproportionately rewarded? (Not that I claim to know whether it is or not, or what that even means, exactly. Or even what the relevence is of the proportionality or lack thereof.)

We also allow anyone who wants to leave the country and renounce citizenship to do so, short of any detention for specific legal reasons not related to emigration restrictions.

I have to leave the house to spend much of the day boringly at the hospital, getting prescriptions, waiting many hours for them to be filled, getting some tests done, etc., but I looked into this question only a couple of weeks ago, and it turns out, in fact, that the U.S. government makes it extremely difficult to renounce your citizenship if there's the faintest reason for them to suspect you're doing it to avoid paying taxes.

I won't give cites just now, due to lack of time, but if folks are interested, I can come back over the weekend with them.

The whole "renouncing citizenship" thing is somewhat complicated.

(Part of how I ended up down a bit of a rabbit hole on this was as follow-up on al-Awlaki, FWIW.)

Neither of these is likely to register as significant for those who think we need to deal first with domestic threats and then with what takes place on foreign soil.

As it happens, our bases in Uzbekistan, and the negotiations with Karimov's immensely repressive government, have played an absolutely key role in the war in Afghanistan, costing the American tax payer many billions of dollars. Moreover, we're pretty hated now in this key country, due to our colloboration with the dictator. You might want to look into this; certainly anyone running for President needs to have a clue.

Since Brett doesn't seem to have an answer for my question regarding his use of gov't provided infrastructure/services and his lack of payment for it (not that he's obligated to have and/or provide one, of course), let me answer for him.

"Sure, I don't pay for, at least, 99.99% of the gov't provided infrastructure/services ("GPIS") I use on a daily basis. Thus, I'm a leach/parasite on society despite my protestations to the contrary and my accusations about others. But I pay more on a per unit basis for my consumption of GPIS than that deadbeat down the street because I make more money than she does and while I also use more GPIS than she does, the progressive rate structure causes me to pay more." (cue Monty Python scene about repression and coming to see the violence inherent in the system) This would, it seems to me, be a little bit more defensible intellectually, but it loses a lot of its moral heft once one realizes that everyone is using more GPIS than they're paying for ("Did you see him repressing me? You saw it didn't ya'?")

...it turns out, in fact, that the U.S. government makes it extremely difficult to renounce your citizenship if there's the faintest reason for them to suspect you're doing it to avoid paying taxes.

I'm guessing that means taxes you already owe the US govt. Anyone leaving the country and renouncing citizenship will be avoiding most if not all US taxes in the future in favor of paying some other country's taxes going forward.

We also get a constant, and high, standard of living from modern dentistry, and plumbers, but that doesn't imply that either dentists or plumbers are entitled to a steeply progressive share of everybody's income.

my failure to fix a broken toilet does not raise the probability of my neighbor's toilet breaking. but if my house if burgled, and the police catch the burglar, the probability of my neighbor's house being burgled is reduced. everybody in the neighborhood benefits when a criminal is caught. so, everybody should pay.

Gary: it turns out, in fact, that the U.S. government makes it extremely difficult to renounce your citizenship if there's the faintest reason for them to suspect you're doing it to avoid paying taxes.

I don't know about that, this website makes it seem rather simple. It notes that you might not be able to escape tax obligations by renunciation (which seems reasonable) or military obligations (which seems far less reasonable), but barring those two caveats, it seems easy. On the tax point, IIRC right now the U.S. imposes an "exit" tax on your assets (though I don't know the %), after something like a $2 million exemption.

'You might want to look into this; certainly anyone running for President needs to have a clue.'

Thanks, Gary

I understand. I suggest Herman Cain can have advisors on this topic just as Obama does. Or do you think Obama handles this without expert help? Not every candidate is knowledgeable at the same level on every important topic. That, in and of itself, does not make any of them confused or stupid people. Obama could certainly take some advice on creating employment opportunity in the USA. He getting some advice but he seems paralyzed or mesmerized by opposition from unions and environmental extremists. Took him 3 years to let go of those free trade agreements.

What would you say if I said that taxes are really a way to manage aggregate demand by draining purchasing power from the private sector so that public spending doesn't overheat the economy?

I'd say I hope that isn't what drives our tax policy.

And maybe to prevent over-concentrations of wealth to prevent de facto aristocracy, if necessary?

I'd say there might be better ways to prevent over-concentrations of wealth.

Not to be overly flippant about it, these are questions with a lot of aspects to them. It just seems like it would be better to address either of the above more directly, rather than indirectly through tax policy.

In my opinion, the primary goal of tax policy should be to raise whatever revenue we need to run things.

I recognize that political considerations come into play, but the starting point, at least, ought to be that the point of taxes is revenue generation, rather than economic engineering.